Barclaycard to raise interest rates for riskiest borrowers

Barclaycard, the credit card company, has warned that it plans to raise the
interest rates charged to some of its customers who appear to be struggling
with their debts.

Barclaycard said a 'tiny fraction' of its borrowers would see rates risePhoto: PA

11:52AM BST 11 Aug 2009

The group said that during the second half of the year it would be imposing a "limited number" of price rises where it had a clear indication that the risk of lending had increased.

But it said the number of people who would see the cost of their borrowing rise would be a "tiny fraction" compared with the 3m card holders who had had their rates reduced during 2009.

The move is likely to anger consumer groups and the Government, which has previously threatened to launch an Office of Fair Trading inquiry into the sector if credit card firms did not treat their customers fairly during the downturn.

It held a "credit card summit" in November last year, after which card providers agreed to give borrowers at least 30 days' notice of rate rises and offer them the option of closing their account and paying off the debt at the existing rate if they wished to do so.

Barclaycard has 11.9m customers in the UK, who collectively owe £10.5bn on their cards.

But results for the group, released last week, show that it suffered a 92pc jump in impairment charges during the first six months of the year to £438m, mainly due to higher default rates in its international business.

The announcement came as the group said its early assistance scheme, which is designed to spot customers who may run into problems before they experience them, had so far helped 11,500 card holders since it was launched in March.

The scheme looks for people whose repayment behaviour has recently changed, or whose account is persistently close to its credit limit.

These customers are then contacted by telephone or text message and invited to discuss their situation with one of the group's debt advisers, who can offer help such as reducing the monthly repayments due, lowering the amount of interest being paid or setting up a repayment plan.

The group also set up a customer helpline in February, which has so far received 6,000 calls, offering people advice on their borrowings.

Antony Jenkins, chief executive of Barclaycard, said: "We know some of our customers are or will be experiencing financial difficulty this year and we want to help. It is equally important that our customers have the right amount of available credit and pay the correct price on their borrowings.

"In the second half of the year, there will be a limited number of price rises where we have a clear indication that potential risks have increased but the numbers involved will be a tiny fraction of the 3m customers who will see their rates reduced in 2009."

Barclaycard customers who are having difficulties keeping up with their repayments can call the financial difficulty helpline on 0844 241 2929.